DEPARTMENT OF ENERGY, LABOR & ECONOMIC GROWTH UNEMPLOYMENT INSURANCE AGENCY

STATE OF MICHIGAN
RICK SNYDER
UNEMPLOYMENT INSURANCE AGENCY
DEPARTMENT OF ENERGY, LABOR & ECONOMIC GROWTH
GOVERNOR
STEPHEN M. GESKEY
ANDREWS. LEVIN, ACTING DIRECTOR
SUSAN R. CORBIN, DEPUTY DIRECTOR
DIRECTOR
UNEMPLOYMENT
INSURANCE AGENCY
January 26, 2011
The Honorable Mark Jansen, Chair, Senate Appropriations Subcommittee on Department of Energy,
Labor and Economic: Growth
The Honorable Mike Kowall, Chair, Senate Committee on Economic Development
The Honorable Wayne Schmidt, Chair, House Commerce Committee
The Honorable Al Ps:cholka, Chair, House Appropriations Subcommittee on Energy, Labor and
Economic Growth
Enclosed please find the annual report the Unemployment Insurance Agency (UIA) is required to
submit pursuant to Sc~ction 22b(f) of the Michigan Employment Security Act being Section 421.22b
of the Michigan Compiled Laws, which provides as follows:
"(/)
Beginning January l, 2006, the unemployment insurance agency shall provide
an annual written report to the chairpersons of the standing committees and the
appropriations subcommittees of the house and senate having jurisdiction over
legislation pertaining to unemployment compensation. The report shall include
all of the following information in a form that does not identify individual
employers:
(i)
The procedures the agency has adopted to prevent SUTA dumping.
(ii) The number of SUTA dumping investigations opened during the year.
(iii) The average length of time to resolve a SUTA dumping investigation and the
number of investigations pending for more than 6 months arid for more than 1
year.
(iv) The number of cases brought before an administrative law judge or the board of
review and the agency's success rate in those cases.
(v)
The amount of money recovered as a result of implementing the provisions of
this section.
(vi) The amount of the balance or deficit in the unemployment compensation fund.
(vii) The estimated fiscal impact of SUTA dumping on the unemployment
compensation fund balance and the factual basis for the estimate.
(viii) The number of full-time employees assigned to, and the number of employee
hours de:voted to, SUTA dumping preservation, investigation, and remediation
<(ix) The number ofSUTA dumping investigations that involved the transfer of
employe:es to or from an employee leasing company.
(x)
The number of investigations in which an employee leasing company was found
to have participated in SUTA dumping.
(xi) The number of employee leasing companies operating in Michigan."
DELEG is an equal opportunity employer/program.
Auxiliary aids, sefVices and other reasonable accommodations are available upon request to individuals with disabl"Jjties.
CADILLAC PLACE• 3024 W. GRAND BLW. • DETROIT, MICHIGAN 48202
www.michigan.gov/uia • (313) 456-2000
the enclosCd report provides the required inforinaiion, ~mg the it8Uci7.ed numbering~· used.in
the quotckt section of 1the Act.
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Stephen M. Oeskey, I . r
Unemplo)rment Insumiice ~cy
Enclosure
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··cc:
Dick Posthuiruls;, SeniorAdVisorto·tfte·Goverb.or,:office ofLegislative Affilirs ·
Senator Tupac Hunter, MinorityVice-Chair, Senate Committee on Economic Development
. ,- Representative Jim Anariic~- Minority Vice-Cbajr, House Appropriations Subcommittee on
·Energy, Labor and-Economic Growth
'~~tative Jon swit81ski, Minority Vi~;l10.use·Commerce Committee.
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S.tate U.nemptoyment Tax Act (SUTA) Dumping
Annual Report.
·January 2011
TABLE OF CONTENTS
(i)
The procedures ·the Agency has adopted to prevent SUTA Dumping ......•.......... 3
Employer Communication and Education Procedure ...•...................................... 3
·Note.on PEO Legislation which may affect·SUTA Dumping ........................ .4
Detection.and Enforcement Procedure .................................. ~ ...••...•..•..............• 5
(ii)
··The numbE~r of SUTA dumping investigations opened during the year .........L ..... 7
(iii)
The average length of time to resolve a SUTA dumping investigation and the
numoor of iinvestigations .pending for more than 6 months and for more than
1 year ............................................................................•..........................7
(iv)
The numbE~r of cases brought before an administrative law judge or the board
ofreview and the Agency's success rate in those cases .................................8
.· (v)
The amou111tofmoney recovered as a result of implementing the provisions of
.this section .............................................................................................8
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(vi)
The amount of the balance or deficit in the unemployment compensation
fund .... .'. ~ .........................................................................:......................... 8
(vii)
The estimated fiscal impact of SUTA dumping on the.unemployment
compensatiion fund balance and ·the factuafbasis. for the estimate .......•............. 8
(viitJ · The number oHull-time employees assigned to, and the number of employee
hours devoted to, SUTA dumping prevention, investigation, and
remediatio111 .......................................................................................... .......... 8
(ix)
The numoor of SUTA dumping investigations that involved the transf~r of
employees to or from an employee leasing' company ···········~······················~······ 9'
(x)
The numbeir of investigations in which an employee leasing company was
found to have participated in SUTA dumping .............................................•.......9
(xi)
The numoor of employee leasing companies operating in Michigan ....................9
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STATE OF MICHIGAN
DEPARTMENT OF ENERGY, LABOR & ECONOMIC GROWTH
UNEMPLOYMENT INSURANCE AGENCY
SUTA Dumping
Employer Communication and Education Procedure
(i) A. General Information
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Through education, detection and enforcement, the Agency seeks to
reduce SUTADumping. The Agency takes the following steps to
communicate with and educate the employer community on the
· .amendments to the Michigan .Employment Security {MES) Act and State
Unemployment Tax Act (SUTA) Dumping:
1. Communication with Employer Community
The Agency has developed informational materials to educate
employers. regarding,the amendments to the Michigan .Employment
Security {MES) Act.and<State UnemploymentTaxAct {SUTA)
:Dumping,and mailthe·information to:employers. The information is
distributed through the Quarterly Tax;Report mailings; special
mailings; meetings and.educational forums with the employer
community.
2. UIA Website
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The Agency maintains·.a section devoted to SUTA Dumping·education
on its website. The website includes:· state legislation, federal
information, Employer Advisor articles, Frequently Asked· Questions,
informational.letters.sentto ~II employers, news··releases related to
SUTADumping, a fact.sheeton SUTA Dumping, as well as a phone
number to the· Employer Customer Relations office for additional
information on SUTADumping. The Agency's website is located at
www.michiaan.gov/uia.
3. Employer Advisor
To provide on-going communication regarding'SUTA Dumping, the ,.
Agency publishes articles in the Employer Advisor which is a quarterly
newsletter made available to the over 218,000 active employers in the
state of Michigan. This neYlsletter is available online.
4. llJIA Outreach.
'There are two general forms of seminars offered. One type of
seminar is done as requested by employer groups. tt·is known as
the Agency's Speakers' Bureau. Any company or organization can
request a speaker by contacting the Agency's Speakers' Bureau
Coordinator at (313) 456:.2943. The second type of seminars are
planne~ by the Agency to cover a variety oftopics including, as
needed, issues related to SUTA Dumping ..
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SUTA Dumping
Employer Communicatlon and Education Procedure
5.Employer Handbook
The Agency's EmployerHandbook, which is a comprehensive guide for
employers. It is revised as necessary, to include updated infonnation
on the SUTA Dumping provisions of the Michigan Employment Security
(MES) Act and additional ·infonnation about SUTA Dumping and other
topics.
6. Updated Fonns
Treasury Fonn 518, "Michigan Business Taxes Registration Booklet," is
· available inelectronic fonnat. UIA Schedule B which must be used to
disclose possible transfer ofbusiness has been made available to
. E~mployers· as a stand-alone fonn and· is available on the Agency's website
('www.michigan;gov/uia).
Paper fonns such.as• UIA 1020, Employers Quarterly Tax Report;. UIA
·1020-R, Reimbursing Employer's Quarterly Payroll Report; UIA 1025,
Employer Request for Address Change; and UIA 151, Power of Attorney
Authorization have been added in electronic versions which can be
·c:ompleted and submitted byemployers through the Internet using an
Employer Web Account.
7. Quality Assurance
The Agency conducts quality assurance reviews throughout the process
to improve communication with t~e employer community and solicit
recommendations to improve service to the Agency's customers.
Note: on Legislation Affecting SUTA Dumping
The Michigan Legislature enacted 2010 PA383, effective January 1,
2011, that requires Professional Employer Organizations, by 2014, to
n~port by client entity the employees they share with those client entities.
The amendmentprovides for a phase-in period, and for a method of
assigning or calculating an unemployment tax ra~e for each client entity,
based on unemployment benefit charges attributed to each client entity
and tax payments, made by or on behalf of each client entity. This will
mduce the difficulty the Agency has encountered in tracking the
u1nemployment experience of employees when they transfer from an
employing entity to a PEO or from one PEO to another. As this new laV(
is implemented over the next three years and PEOs adopt.the new client
level reporting·process, it is expected that there will' be fewer SUTA
cases.
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SUTA Dumping
Detection and Enforcement Procedure
1)
Refe1rrals for possible SUTA Dumping are received from the SUTA Dumping
Dete~ction -System software; external sources such as other employers,
claimants, and other states;-and internal sources, including the Bureau of
labor Market Information and·Strategic Initiatives (LMI), Attorney Generars
Office, other state agencies, and the Unemployment Insurance Agency's (UIA)
Claimant Customer Relations, Employer Customer Relations, Problem
· Resc1lution·Offices, Remote Initial Claims Centers (RICCs) and Benefit Fraud
Dete ction Unit.
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2)
---Based on Agency review of the-referrals, a decision is made as to whether a
SUTA Dumping investigation is needed.
3)
If a SUTADumping;'investigation is considered necessary, documentation
relatE~ to the -transactions, ownership, transfers and correspondence is
prepared for the case. Documentation is obtained :from internal Agency
records including-wage>records, tax ;filings; .employer registration reports,
·empl4:>yer correspondence; and filing~ with the related Corporations and_
Securities :Bureau _of the Department ofEnergy, Labor & Economic Growth. All
- known accounts and companies are reviewed.
4)
5)
A reforral is forwarded to the UIA's Field Audit Section, along with all
documentation pertaining to the case. The Field-Audit Area Supervisor
assigns the case to an auditor/investigator.
Documentation is reviewed by the auditor/investigator assigned. If needed, an
:audit and/or investigation is scheduled and an auditletter is mailed to the
employer confirming ihe audit date; time and location. Enclosed with the.letter
is a blrochure that explains the audit process and the records needed for the .
audit.
6)
The auditor may also conduct a financial audit at _eitherthe company's
location or at the -office of its financial advisor. A financial audit is
conduicted in compliance with Chapter Seven of the US Department of Labor
Tax Performance System as mandated by federal law. ·
busim~ss
7)
After the audit is completed, a closing conferenge is held with the employer at
which time the auditor will provide a letter that outlines the steps for the
remainder of the process.
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SUTA Dumplng
Dete<:tion ·and Enfo·rcement Procedure
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The results of the audit and/or investigation are reviewed by the Field Audit
Area Supervisor to assure quality and completeness.
9)
The information is presented to appropriate UIA staff and the Labor Divisjon,
Unemployment Unit ofthe Department of Attorney General for review. After .a
thonough.review, a decision is made whether SUTA Dumping has occurred.
· Add1itional information ,may be· required and the auditor or· investigator will
follow up with the employer to collect the information needed.
10) The Agency prepares a Determination that details its decision which is
mai~ed
to the employer's address of record.
a written protest to the
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Determination. Upon issuance of:a Determination, the tax loss, interest and,
11) By law, the employer has 30 days to file
··as appropriate,. penalty with interest on penalty will be posted to the
employer's account.
12) 'If thE~. employer protests the Determination in a timely rnanner, the written
·information in the protest.will' be considered. Following a review of the protest,
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a Redetermination is issued which affirms, modiftes, or reverses the
Deteirmination. An employer may appeal the Redetermination to the State
· Offic:e of Administrative Hearings and Rules (SOAHR) for a full evidentiary
hearing before an Administrative Law Judge (ALJ).
13) The decision of theAdministrative Law Judge may be appealed by the
aggrieved party to the Michigan Employment Security (MES) Board .of Review
or upon stipulation by the employer and the Agency, the matter may be
appE~aled directly to circuit court.
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14) If eitlher party believes thatthe decision of the MES Board of Review is
inco1Tect, the case may be appealed to the circuit court for review. A decision
of the- circuit court may be further appealed, by leave, to the Michigan Court of
ApJ>E~als, and ultimately, by leave, to the Michigan Supreme Court.
15) Upo1i issuance of a ·Determination or when a settlement has been reached, if
applicable, adjustments will be made to the employer account. The employer
has an option of entering into a payment plan
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SUTA Dumping
Detection.and Enforcement Procedure
If at any t.ime the employer refuses or fails to comply with the Agency's
'audit orr~equests for information (pursuant to Section 9 of the MES Act and
:Rule 190 oftheAdministrative Rules), the following steps shall occur:
a. The Auditor contacts the employer (via letter, email, phone
call, or in person) and requests additional information.
b. .If the information is notprovided within five business days, a
4etter is mailed requesting the information within ten business
days.
<:. ·If the employer stiU fails ·to comply, a subpoena· is issued
(pursuant.to Section 9 of the MES Act).
cl. If the employer does not comply with the subpoena, the Labor
Division, Unemployment Unit of the Office of Attorney General,
may .upon request, issue a demand letter citing the subpoena
and requiring the requested information due within ten business
days.
E~. If the employer does not comply with the demand letter, the
Agency will issue its decisions based on the best available
information.
(ii)
The. number of SUTAdumping investigations opened during the year.
As of DecembE~r 31, 2010, there .have been 115 SUTA Dumping investigations
opened :Since Jlanuary 1, 2010, citing possible violations of Sections 22(b), 22b,
54b, and/or Section 54{b).of the Michigan Employment Security (MES) Act.
·(iii) The average length· of time to resolve a SUTA dumping investigation
and the number of investigations pending for more than 6 .months and
for more than 1 year.
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The average IEmgth of time to resolve a SUTA Dumping investigation is 17.
months. There have been. 187 investigations pending for more than 6 months
and 165 investigations pending for more tha_n 1 year.
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Please note that in calculating the length of time to resolve a SUTA Dumping
investigation, the beginning of the period is the date the investigation .began, and
the end of the·1period is the date the Determination was issued, or the date when it
is ·concluded that no SUTA Dumping has occurred .. An appeal process is available
to the parties .p1ursuant to the MES Act, --and· includes both administrative and
judicial appeal process rights and is not factored into this timeline.
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The number of cases brought before. an administrative law judge or the
board of f,eview and the Agency's success rate in those cases.
(iv)
There have been seventeen cases brought before an Administrative Law Judge or the
:MES Board ofReview in 2010. Of the decisions issued (eleven decisions issued), all
decisions were in the Agency's favor. Six of the eleven decisions were decisions to
.grant the withdrawal of appeal but are considered favorable· here, since a settlement
was reached.
The amount of money recovered as a result of implementing the
provisions of this section.
(v)
During.calendar year: 2010, the Agency has recovered and returned to the Trust
Fund $2,324, 777 . 34.
The• amount of the balance or deficit in the unemployment
compensation fund.
(vi)
As of December ~~1. 201 Oi the balance for Michigan's Unemployment Insurance
Agency's Trust Fund is deficit of $3.7 billion.
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(vii)
The estimated fiscal impact of SUTA dumping on the unemployment ,
compensation fund··balance and the factual basis for the estimate.
The {Jnemploymentlnsurance Agency estimates the fiscal impact ofSUTA .Dumping
.·on ·the .unemployment compensation fund balance for the calendar year 2011 will be
similar to the amountcoHected in 2010 or slightly more, approximately $3 million in
underpaid unemployment truces is·anticipated.
(viii)
The numb4ar of full-time employees assigned to, and the number of
,employee hours devoted to, SUTA dumping prevention, investigation,
and remediation .
.There were a total of 15, 118 hours spent in prevention, investigation and resolution of
SUTA cases in calendar year 2010. This equates to 7.26 full time employees.
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(ix) The number.of SUTA dumping investigations that involved the transfer of
'.·employees to or from an employee leasing company.
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Of the 115 investi!gations initiated in 2010, 17 investigations involved the transfer of
-employees to or from employee leasing companies.
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(x)
The numbE~r of investigations in Which an employee leasing company was
;found to have participated in SUTA dumping.
-In 2010, 141 emp~oyee leasing companies investigated in 17 cases were found to
have participated in SUTA Dumping.·
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(xi) The number of employee leasing companies operating· in Michigan.
-Accofding to the Department of Energy Labor and Economic Growth (DELEG), Bureau
~oftabor,Market Information and 'Strategic Initiatives, as of December 31, 2010, there
were· 583 active companies in Michigan identifying themselves as employee leasing
companies.
Thenumberr0femployee leasing companies registered in Michigan includes a variety
ofdifferent status 1types. There are 1,493 companies that have registered as
·employee leasing companies :on the Agency's computer systems. However, 736 of
those accounts an~ listed as terminated, 20 are .Jisted:as,non-liable, 101 are listed as
cancelled and 53 are fisted as currently inactive. The status of some accounts may be
subject to dispute.
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